The State of Today's Market
Kerry S. Atkinson
ECO/
26 June 2012
Daniel Puente

The State of Today's Market There are four key factors that should be discussed though there are many to consider when evaluating the state of an economy. The points for discussion will be unemployment, interest rates, expectations, and consumer income. This portion of analysis hits home for most Americans to where they understand the most. For most of the working class of Americans these four topics also dictate to their well being a bit more that of the elite class of society that though these topics may affect their lives and their investments or the corporations they own or take part in but in the lower and middle class these items affect whether or not employment opportunities exist. How goods are purchased or if they are purchased and at what price the goods are attained. These four key components also lend to the scarcity of goods and how they are perceived and purchased.
Interest rates The economy is affected by interest rates in relation to mortgages, credit cards, government debt, and corporate bonds to name just a few. To break it down for better understanding, one can view interest rates based on short and long terms. Long-term interest rates are the price paid for the use of financial assets with long repayment periods. Some common examples are mortgages and government bonds (Colander, p. 312, 2010). On the other end of the spectrum, short-term interest rate is determined in the loanable funds market and the short-term rate is determined in the money market (Colander, p. 312, 2010). The Federal Reserve implemented a plan titled Operation Twist in 2011 that aimed at reducing borrowing costs for businesses and consumers (Appelbaum, 2012). The efforts of the Federal Reserve is based off a major concern that the economy is showing little signs of positive growth coupled with the unemployment rate projected to stay above 8% for the remainder of 2012 with inflation to hover around 1.7%, which are signs of an ailing economy (Appelbaum, 2012). By having the Federal Reserve step in and control interest rates while attempting to stave off inflation is a model of Keynesian economics. During the Great Depression, the Keynesian model was embraced by President Franklin Delano Roosevelt and has stayed with the country in one form or another, for the past 70 years. In 2008, President George Walker Bush enacted the Troubled Asset Relief Program (TARP) to stabilize the United States economy, along with the Global Economy (Jaffe, 2010). As with the President Roosevelt and the New Deal, President Bush encountered fierce critique on the TARP program. It was the feeling of the critics of the program that it just handed money to the same Wall Street banks that plunged the country into recession in the first place (Jaffe, 2010).
Unemployment
The current unemployment rate released on June 1, 2012 from the Bureau of Labor Statics showed that the unemployment remains at 8.2 percent. The amount of people unemployed is about 12.7 million. Almost half the unemployed people have been long-term unemployed at a rate of 5.4 million. This means that they have been unemployed for 27 weeks or longer ("Bureau of Labor Statistics", 2012). Aggregate supply (AS) and aggregate demand (AD) model shows the expected effects that the shifts in AS and AD have on output and price levels. The equilibrium in the model is when AD intersects with the LAS curve in which the government can use the fiscal policy to shift the AD curve to achieve the desired level of real output (Colander, 2010). With unemployment on the high end of the scale it is important to look at the fiscal budget to see which direction the government is attempting to go. President Obama set his fiscal budget plan for 2013. Obama states that we must transform the economy that is focused on speculating, spending, and borrowing to one that is constructed on education, innovation, and building. We must all start living within our means and start cutting wasteful spending. This is important but at the same time we need to remember to keep investments that are needed in order to grow the economy and also create new jobs. Obama says he is going to focus on directing scarce federal money to resources that are critically needed to grow the economy and restore the middle class. Obama plans on supporting the education of Americans, innovation, development, and infrastructure ("Office of Management and Budget", 2012). Along with fiscal policy comes fine-tuning. The object of fine-tuning is for the government to respond to problems before they occur. It is impossible to believe in fiscal policy because it will need to be continually adjusted before the problem occurs. As great as the AS/AD model looks on paper it is not as applicable in the real world.
Expectations
With the current growth and development of the U.S. economy come expectations from what is forecasted for the future of said economy. The Ebb and Flow of both consumer spending and the GDP currently sitting steady at 2.2% annual percent, the economy had quite a slower first half in its spending along with consumerism at a lower pace. Much can be expected from these estimates as to what markets and demands are being asked by the populous, however, it is merely a gauge and an estimate that some find to be inaccurate and change within a moments notice. This change in economic growth can be caused by what is either in demand at any given time, from prices of corn or wheat or even automobiles, many items are gauged upon from this futures prediction. Even with the slacking of employment and lack of jobs can be detrimental to the final predictions and expectations. Expectations according to MSNBC.Com, the U.S. economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a moderate pace, but stronger demand for automobiles softened the blow (MSNBC, 2012)
Consumer income According to Forbes.Com consumer’s income and consumers expenditures dropped in August of 2011 demonstrated the dismal state of the U.S. economy last year and the lack of consumer income available to move the already sluggish economy (Forbes.Com, 2011). This continuing despondent economy of the United States has not improved by much since last twelve months. According to Rankin and Davis March, April, and May off 2012 shows that though Income and Salary showed an increase by $17.6 billion in March and another $12.9 billion in April is a barely noticeable in the market today to show an increase of those months of a range of two-tenths of a percentage to four-tenths of a percentage point in comparison to the larger picture of the U.S. economy. The Wall Street Journal goes on further stating that the economy today is only doing as well as it is doing today due to government intervention through means of unemployment benefits, food stamps and other government programs in fluxing monies into the government (Madigan, 2011). This point is further collaborated by the U.S. Bureau of Economics showing the payments for social benefits in decreasing by 1.1 billion in April of 2012, in March there was an increase of $6.6 billion. Influxes of an increase $12 billion dollars into the economy in two months, a loss of which may have hit the economy harder and asks the question for consumers: Is the giving of government funds maintaining the economy or is it making things worse in creating more debt. To what point can the U.S. afford to maintain this rate of infusions to the United States economy. There is one source of assistance to the U.S. Consumer through increase of sales to China. According to CBS News in China this is the Year of the Dragon to which many Chinese have been waiting for the opportunity to have a baby in this year driving a baby boom. This is advantageous to the United States corporations that produce baby products including but not limited to diapers, bottles, rubber nipples, cribs, educational toys, etc. To purchase for their children in China due to the poor customer confidence in similar Chinese products from the lead scare and other toxins found in Chinese made toys and products (CBSNEWS.COM, 2012). Though this would not fix the woes of the U.S. economy but could give a little bit of relief from an unlikely source in a time of need.
The picture of the economy is still not a positive one. Fiscal responsibilities of the government coupled with realistic expectations that the federal government to intercede for the sake of the people is a fine balance and not one person has all the answers. The need to create jobs for the purpose of lowering government spending and the advancement of creating, movement and the purchasing of goods creates its own force to sustain the welfare of the public however, the political and financial joust of how to implement and create change without over burdening the public with more debt that may exacerbate the more than $15 trillion national debt and indenture the American public to the same fate of that of Greece. In this time of financial need it is important for the public sector to grow and produce the needed employment for moving forward. By lowering taxes for those of the public willing to take risks to create new opportunities for new corporations, creating new jobs and new revenues that would not be there without entrepreneurs willing to take risks. Though the Keynesian model would dictate to the government to either cut taxes on those willing to create new opportunities or pay out funds to maintain the public’s individual needs. The greater reward will be in the creation of jobs while minimizing overall costs and debt that may never be repaid and will eventually eliminate any chance to a real future for our economy.

References
Appelbaum, B. (2012). New York Times News Service. Retrieved from http://www.theledger.com/article/20120620/POLITICS/120629964?Title=Fed-Takes-Modest-Action-on-Interest-Rates-as-International-Economic-Forecast-Dims
Bureau of Labor Statistics. (2012). Retrieved from http://www.bls.gov/news.release/empsit.nr0.htm
CBSNEWS.COM. (2012. March). Baby dragons' effect on China Market. Retrieved from http://www.cbs.com/video/watch//id=7403172ntag=mncol;lst;5
Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.
Forbes.Com. (2011, September). consumer Income, Spending Weak in August. Retrieved from http://www.forbes.com/2011/09/30/consumer-
Jaffe, M. (2010). ABC News. Retrieved from http://abcnews.go.com/Politics/tarp-government-bailout-ends-sunday-started-bush-gop/story?id=11765955
Madigan, K. (2011, June). Consumer income only kept afloat by goverment. Retrieved from http://blogs.wsj.com/econaomic/2011/06/30/consumer-income-only-kept-afloat-by-goverment-payments/?mod=google_news_blog
Rankin, J., & Davis, H. (2012, June). U.S. Department of Commerence Bureau of Economic Analysis. Retrieved from http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
Bureau of Labor Statistics. (2012). Retrieved from http://www.bls.gov/news.release/empsit.nr0.htm
Office of Management and Budget. (2012). Retrieved from http://www.whitehouse.gov/omb/budget
MSNBC.Com, (2012, April) US Economy Grows at Tepid 2.2% Pace; Misses Estimates, Retrieved from http://www.cnbc.com/id/47202822/US_Economy_Grows_at_Tepid_2_2_Pace_Misses_
Estimates